At a glance
- Corporate tax
- 4.9% ($50 minimum)
- Tax on wages
- 2.5% flat
- Sales tax
- TPT 5.6% + city and county
- Economic nexus
- $100,000 in retail sales
- Minimum wage
- $15.15/hr
- UI wage base
- $8,000
- New-employer UI rate
- 2.0%
- Paid leave program
- None
- Annual report
- Registration anniversary — $45
2026 figures, each explained with its source on the area’s page. On top of the federal baseline.
Setup, in order
Register the corporation
Before doing business in Arizona — usually the first hire or officeFile an Application for Authority with the Arizona Corporation Commission and appoint an Arizona statutory agent.
Register for withholding
Before the first Arizona payrollRegister with ADOR for withholding using the Joint Tax Application, and give each employee Form A-4.
Register for unemployment insurance
When you first pay wages in ArizonaOpen an unemployment insurance account with DES and file the quarterly UC-018.
Report new hires
Within 20 days of each hireReport each new or rehired employee to the Arizona New Hire Reporting Center.
Buy workers’ compensation
Before the first employee startsWorkers’ compensation is required from the first employee.
Post notices
Before the first paydayPost the minimum wage and earned paid sick time notices and give employees the required written sick time notice.
Get a TPT license
On physical presence, or at $100,000 of retail salesGet a TPT license from ADOR covering the state and every city where you have business locations or sales.
The six areas
- AccountingAccounting and state tax in ArizonaA 4.9% corporate income tax with a $50 minimum, on an Internal Revenue Code frozen at a fixed date the legislature moves each year — to January 1, 2026 as of June 2026.Corporate income tax4.9%
- ReceivablesReceivables and sales tax in ArizonaArizona’s TPT is a tax on the seller, at 5.6% plus city rates. SaaS is taxable as a personal property rental, but the $100,000 economic threshold counts only retail sales.State TPT rate5.6%
- PayablesPayables and contractors in ArizonaArizona collects 1099s that show Arizona withholding with the A1-R by Jan 31, offers a statutory contractor declaration, and charges use tax on untaxed SaaS.State 1099 filingJan 31
- PayrollPayroll taxes and employer rules in ArizonaA flat 2.5% income tax withheld at the employee’s Form A-4 election, UI on the first $8,000 of wages, a $15.15 minimum wage and earned paid sick time from the first employee.State income tax2.5%
- ComplianceCompliance and filings in ArizonaRegister with the Corporation Commission for $175, file a $45 annual report on your anniversary date, and hold one TPT license from ADOR for the state and its cities.Application for Authority$175
- AdvisoryAdvisory: credits and decisions in ArizonaArizona’s R&D credit is 24% on the first $2.5 million and 15% above, no longer refundable from 2026 but carried forward ten years. QSBS follows the federal rule.R&D credit24% / 15%
Who you register with
- Arizona Department of Revenue (ADOR)Corporate income tax, withholding, TPT licensing for state and cities, unclaimed property
- Arizona Department of Economic Security (DES)Unemployment insurance tax account and new-hire reporting
- Arizona Corporation Commission (ACC)Application for Authority and annual reports
- Industrial Commission of Arizona (ICA)Minimum wage, earned paid sick time, workers’ compensation
- Arizona Commerce Authority (ACA)R&D credit certifications and angel investment credits
Hiring across the border
An employee who lives in one state and works in another is the most common way a startup ends up registered in two. These are Arizona’s neighbors.
- CACalifornia$800 minimum tax, the ABC test, daily overtime — and SaaS sales tax from 2027
- NVNevadaNo income tax; a payroll tax called the MBT and a Commerce Tax above $4 million
- UTUtahFlat 4.45% tax after a sixth cut, a $100 minimum, and SaaS taxed where it’s used
- COColoradoFlat 4.4% tax, FAMLI premiums, and home-rule cities that run their own sales tax
- NMNew MexicoA gross receipts tax on services, a flat 5.9% corporate rate and combined returns
Common questions
Does Arizona follow the federal Section 174 changes?
Arizona conforms to the Internal Revenue Code as of a fixed date and moves that date by statute. H.B. 4168, signed June 13, 2026, moved it to January 1, 2026, including federal provisions with retroactive effective dates, so Arizona now follows the 2025 federal law that lets domestic research costs be expensed again, with stated exceptions such as qualified production property. ADOR published filing instructions before the bill was enacted, so returns already filed for 2025 may need a second look once ADOR issues its follow-up guidance.
Is SaaS taxable in Arizona?
Yes. The Department of Revenue taxes SaaS as a rental of tangible personal property. The Court of Appeals upheld that in ADP v. Arizona Department of Revenue in January 2023, and the Arizona Supreme Court declined review that September. Cities apply their own rates to the same transaction.
Do we owe use tax on software subscriptions?
Possibly. Arizona treats SaaS as a rental of tangible personal property, and an Arizona business that buys it from a vendor that doesn’t charge TPT owes use tax, at the state rate, plus city use tax where the city levies one.
How is Arizona withholding calculated?
Each employee chooses a flat percentage of gross wages on Form A-4. The 2026 choices run from 0.5% to 3.5% in half-point steps, and an employee who expects no Arizona tax liability can elect zero. An employee who doesn’t file one is withheld at the 2.0% default. Employers must offer Form A-4 to new hires.
When is the Arizona annual report due?
On the anniversary of the date the company registered in Arizona, every year. The Corporation Commission charges $45 for regular processing, and a late report brings a monthly penalty and eventually a notice of administrative revocation.
Is the Arizona R&D credit refundable?
Not any more. Through 2025, a company with fewer than 150 employees could apply to the Arizona Commerce Authority to receive 75% of its excess credit in cash, from a $5 million yearly statewide pool. H.B. 4168 repealed that refund for tax years beginning from January 1, 2026. The credit still offsets Arizona corporate income tax, and what can’t be used carries forward for ten years.
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
- Arizona Department of Revenue — Corporate Income Tax
- Forvis Mazars — Arizona updates IRC conformity date to January 1, 2026
- Arizona Department of Revenue — Transaction Privilege Tax
- Arizona Department of Revenue — Economic Threshold
- Arizona Department of Revenue — Out-of-state businesses and physical presence (TPR 24-1)
- Snell & Wilmer — SaaS remains subject to TPT in Arizona (ADP v. ADOR)
- Arizona Department of Revenue — Withholding Tax
- Arizona DES — Unemployment Insurance Tax
- Bloomberg Tax — Arizona decreases unemployment insurance tax rates for 2026
- Industrial Commission of Arizona — Labor Department
- Industrial Commission of Arizona — Minimum wage and earned paid sick time
- Arizona Corporation Commission — Schedule of Fees (Corporations)
- Arizona Commerce Authority — Research & Development Tax Credit
- Arizona Legislature — H.B. 4168 (2026) fact sheet, as enacted
- Arizona Revised Statutes § 43-1168 — Credit for increased research activity
- Arizona Commerce Authority — Angel Investment Program (2026)
- Arizona New Hire Reporting Center
- Arizona Department of Revenue — Unclaimed Property
- Arizona Department of Revenue — Unclaimed property quick reference guide
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.